Plans to save a home can fail

Sunday

Mar 30, 2008 at 12:01 AMMar 30, 2008 at 11:29 AM

HACKENSACK, N.J. -- Kevin and Jean Petterson of Rutherford, N.J., fell behind on their mortgage payments in mid-2005 after Kevin, a truck driver, broke his ankle and was unable to work for several months.

HACKENSACK, N.J. -- Kevin and Jean Petterson of Rutherford, N.J., fell behind on their mortgage payments in mid-2005 after Kevin, a truck driver, broke his ankle and was unable to work for several months.

In 2006, facing foreclosure, the couple got a letter from Elite Financial Solutions, a company in Scotch Plains, N.J., that offers to help "stop the foreclosure process!" It promises "No gimmicks or tricks."

But Kevin Petterson, 41, says the company left his family in deeper debt and in danger of losing their small Cape Cod.

"I'm going to have to go Chapter 7 (bankruptcy)," Petterson said.

The Pettersons' story spotlights a new player in the housing bust -- foreclosure "rescue" companies that find distressed homeowners through public records. Some of the companies have been accused of "equity stripping" -- taking whatever equity these desperate people have in their homes.

"Homes are literally being stolen from their owners all over the country," said a June 2005 report called "Dreams Foreclosed" by the National Consumer Law Center.

The number of foreclosures is on the rise nationwide. RealtyTrac, which follows foreclosures, said last month that 1.9 percent of homeowners are in some stage of foreclosure, which starts with missed mortgage payments.

Stev French, president of Elite Financial Solutions, denied any wrongdoing and said Elite Financial should not be lumped in with unscrupulous companies that strip clients' home equity. French said he outlined all the options Petterson had, including filing for bankruptcy, selling the house or trying to work out a payment plan with the lender.

But the Pettersons chose to sell their home to a person working with Elite, then rent it with the hope of buying it back in the future, French said.

"We were not trying to do anything illegal with him," French said. "I am not a predator."

He said Petterson was to blame for his problems because he didn't make the payments he promised.

"The gentleman doesn't take care of business, and now it's everybody's fault but his," French said.

Consumer advocates and bankruptcy lawyers say the number of companies offering questionable services to distressed homeowners is on the rise.

Even when they don't engage in fraud, these companies often waste homeowners' time and energy, which could be spent on more productive steps such as working out a payment plan with the lender, selling the house or consulting a bankruptcy lawyer, consumer advocates say.

There are variations on the foreclosure rescue plans. In one of the most common, homeowners agree to sell (or even hand over) the home, thinking they'll remain in the house as renters and be able to buy it back in a year or two. The rescuer will recruit and pay someone to take title to the house and refinance the mortgage in his or her own name.

"Homeowners are sometimes told that surrendering title is necessary so that someone with a better credit rating can secure new financing to prevent the loss of the home," according to "Dreams Foreclosed."

But the homeowners' financial situation rarely improves to the point that they can afford to buy the home back. They often end up losing the house, the report said.

The Pettersons say Elite Financial told them that if they sold their home to an investor named Shannon Garretson of Scotch Plains, they could avoid foreclosure. Elite recruited Garretson for the deal with a promise of a $10,000 payment, French said.

The plan was for Garretson to refinance the mortgage and Elite Financial to use that money, in part, to clean up the couple's debts, both Elite and the Pettersons said. Then the Pettersons might be able to get back on their feet financially and buy back their home within two years. But they soon stopped making payments -- partly because they couldn't afford them and partly because they thought they had been misled.

The new mortgage company took the payments out of the escrow account, which ran out in mid-2007.

When the escrow account ran dry, the mortgage payments ended, and the house is now in the foreclosure process again. There is a good chance the Pettersons, who have not made any payments for close to two years, will be forced to move.

And now, letters from other foreclosure rescue companies are arriving at the house addressed to Garretson.

The Pettersons complained to the New Jersey Department of Banking and Insurance, which told them that the matter was a contractual dispute and not regulated by the department. Elite is not licensed by the department, and there is no requirement that foreclosure consultants be licensed.

French defended his company, saying he has helped many distressed homeowners. He put The Record in touch with Minerva Concepcion of Camden, N.J., who said French recently helped her refinance her mortgage and put her home in her son's name after she ran into financial trouble. Concepcion said French charged her about $5,000 for his services.

"At that time, I was very stressed out," Concepcion said. "It worked out better for me to work with him."

In one of the most common plans, homeowners agree to sell the home, thinking they'll remain in the house as renters and be able to buy it back in a year or two.

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